You always see people asking famous personalities this question, 'if you could give an advice to your younger self, what would you advice?'
As a FA, I interact with many people. Having observed the lives of many individuals half-way towards their retirement, I've arrived at my own advice for my current self to prepare for the future wisely.
Have you ever asked yourself what your life might be like 20 years into your working life? Perhaps you might wish to further your studies but fear you cannot do well if you did it part-time. Perhaps you might decide the current career isn't fulfilling and want to try something new but fear the financial risk to make the change. Perhaps you want to spend more time with your children but your work demands you to only spend tired weekends with them. Perhaps you want to travel and take on some riskier adventures while you are still energetic but you don't have enough leave to go on prolonged trips.
What would you do?
Wouldn't it be nice if you could just take a 1 - 2 year hiatus from work and clear your bucket list?
With enough foresight and preparation you can.
On the flip side, if you approach your life with a optimistic unplanned outlook, perhaps the future might look pretty much like... you want to take a hiatus but you cannot stop because you have tons and tons of financial commitments like your mortgage, your children tuition, your car loan, etc which you rely solely on your income to pay. After a while, you might get numb by the situation and convince yourself you simply got to suck it up and work.
The Advice I Would Give My Current Self
Start building multiple streams of income so that my main source of income will not be what I solely need to rely on 20 years into my career.
When we are young, we might have a generic idea what we believe the future looks like but we wouldn't really know until we live through certain experiences. For example, I've always seen myself climbing the corporate ladder but today I'm self employed. Sharon Au a very popular Mediacorp artiste, now works as an Investment Director in Paris. In order to do a career switch, she spent 6 years furthering her studies in Japan and France. Recently, I've a client tell me she's going into part-time employment because her children needs her close supervision.
My point? We wouldn't know how our outlook of life would change hence we shouldn't allow ourselves to be held hostage by our jobs. In fact, the higher our incomes, the more 'in danger' we are. Ultimately, it's easier to use side hustles to replace incomes less than $5000.
Investment Income As the lowest hanging fruit
There are many types of additional income streams ranging from active to passive income. In my view though, using money to grow more money is probably the most time efficient and affects your quality of life the least.
In my view, active income efforts like side gigs, running a business or even trading take up too much additional time as you need to sacrifice your original rest time (after finishing your main job) to cater for it. Of course, if you are diligent, you can do this on top of all your other efforts.
Using our savings to work for us while we aren't using it is probably the smartest form of additional income generation. It does not take up additional working hours while the money is working for us. Of course, it's still advisable to spend a bit of time doing your homework/research before committing into an instrument. What I like most about this approach is that it frees up your rest time to recharge and maintain your sanity.
Getting Started
Apart from 6 months of emergency funds, I'd say we should ensure the rest of our funds are engaged in certain instruments to work harder for us. There are certain common instruments that many of us would have heard of namely, dividend income, rental income and annuity income. There are also some less known options such as income from options trading, bitcoin mining and micro-loans, just to name a few. In terms of which option should we choose, would depend on our risk appetite and amount of funds required to start. I'd say a sensible approach would be to start exploring from the lowest risk & entry option to the highest risk & entry option.
Why starting as soon as possible is so important
Let's assume you need an income of $2000/month to fund all your on-going expenses. You intend to stop work for a 2 year period to study and nobody knows if you can get an equivalent paying job once you are back after 2 years. You wish to fund your entire expenditure with your other income streams. To make it easier, I'd just use Singapore stocks as a commonly known instrument to generate dividend income. The average income generated from your portfolio is 5%. Now if you only decide to invest 5 years ago and you need to earn a $2000 monthly income at 5% per annum to stop work immediately, you need to invest $480,000 in total which is $96,000 per year. On the other hand, if you started since you began working and intend to further studies for example in 15 years, then you only need to invest $32,000 per year which is easily achievable for many higher income earners especially if we count in their bonus and AWS.
Of course, such simplistic math is only for illustration. There are multiple ways to generate income. There is also more than one approach to fund your goals depending on when you start and the amount of resources you have to work with.
Why is this the best gift for our future self?
In my 2 years working as a FA, I've personally known a few individuals who have stopped work for varying reasons. I've known someone who took a hiatus from work to pursue further studies with a view to pursue other interest or do a career switch. I've also met a couple who decided one half of them should stay home to look after a new born because they prefer it that way. I have a friend who took a huge 4 figure pay cut for more work-life balance. One of my client has been preparing to exit her full time job within the next 1 - 2 years in order to start a business venture. I've even had a colleague quit her full-time job to join my firm this year as a FA because her previous job didn't allow her much quality time with her kids. Recently, another client of mine just switched to part-time employment in order to cater more time to her children. These are just some of the encounters I have. It's becoming increasingly common.
Whether you intend to stop work or not, having such an option available is always valuable. This option will not appear out of nowhere. You need to prepare for it. By ensuring that your funds are working harder for you while you work, you essentially free yourself from being enslaved in your job. You also free yourself from the fear of retrenchment.
Even if you love your job and never ever see yourself leaving, setting up multiple income streams basically earns you more money without you working harder. Why would anyone say no to more wealth if the effort is minimal? You can buy yourself a better life, more security and less worries!
If you would like to explore creating a secondary income for yourself, please speak with a trusted advisor. You can also drop me a message if you would like me to help you with it.
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Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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